State Bank of Vietnam to keep policy rates steady in 2024: UOB

The State Bank of Vietnam (SBV) will maintain its refinancing rate at the current level of 4.5 per cent to support economic recovery. (Photo: VNA)

HCM City - With the pace of economic activities on the mend and inflation rates already easing below the target level, the State Bank of Vietnam (SBV) will maintain its refinancing rate at the current level of 4.5 per cent to support economic recovery, the United Overseas Bank (UOB) said in a report.

According to the UOB’s Global Economics & Markets Research, Vietnam’s GDP growth accelerated further to 5.33 per cent year-on-year in the third quarter of 2023, from 4.14 per cent year-on-year in the second quarter. This was underpinned by improvements in the trade performance, manufacturing sector output and domestic activities after struggling in the first half of 2023.

Data releases for the October-November period reaffirm that activities have stabilised and, in some cases, improved markedly compared to the first half of the year. Manufacturing output has been unceasingly accelerating since its negative reading in May, suggesting that the sector’s momentum is likely to continue into 2024.

Experts from the UOB expects the momentum from the third quarter to carry over to the final quarter of the year, especially with more supportive domestic policies. They maintain the country’s full-year growth forecast at 5 per cent, with the assumption of further acceleration of real GDP growth in the fourth quarter to 7 per cent year-on-year.

The UOB’s updated USD/VND forecasts are at 24,000 in the first quarter of 2024, 23,800 in the second, 23,600 in the third, and 23,500 in the fourth.

In its latest report, HSBC’s global research team also expected the SBV to hold its policy rate steady at 4.5 per cent in the whole of 2024 to support economic growth and recovery.

Inflation rate under control and economic prospects, especially on the external front, are robust signs; however, the risk of increasing prices is on the horizon.

The HSBC experts also warned about trade prospects as demand in large trade markets is still weak despite recent data showing Vietnam’s stable export growth. The country’s Manufacturing Purchasing Managers’ Index (PMI) dropped to 47.3 in November, with production volumes and the number of orders decreasing.

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